Significant challenges still exist, however. For example, we know that human
drivers will still need insurance protection even after more vehicles become automated. There are several ways this can
be done, but one example would involve
telematics and usage-based insurance.
When the driver shifts the car away from
an automated mode, this pay-as you go
insurance is automatically triggered. The
car will communicate to the insurance
carrier of choice to start charging usage-based insurance utilizing information like mileage, speed, time, location
and driving style (such as application of
brakes and lane departures). Other data
needs could include vehicles’ safety conditions and the other vehicle’s proximity
when the accident occurs.

As properly matching price with risk
is something insurers will be grappling
with, they will need the utmost freedom
in rating, underwriting and insuring this
technological advancement. Fair pricing,
though challenging, is necessary both to
properly determine the cost of risk and to
help efficiently and effectively bring automated vehicles to market.

If automated vehicles and their insurance coverage are overpriced, a potentially
life-saving technology could become un-affordable or delayed in being brought to
market. On the other hand, if automated
vehicles and their risks are underpriced,
less-safe vehicles may be introduced too
quickly. Incorrect pricing of risks can also
lead to unfortunate cross-subsidies between vehicles and customers.

Cyber attacks will also need to beconsidered, as telematics and dedicatedshort-range communications can makeautomated vehicles an easy target for ve-hicular attacks. Finally, insurers need toconsider that consumer appetites maychange over time. In the present market,for example, the design and overall “look”of a car remain important factors to manybuyers who own their cars. However, if a‘Lyft’-type of automated car service be-comes popular, consumers may not beconcerned by the idea of potentially vis-ible technology, since they won’t actuallyown the vehicle.These are just some of the necessaryconsiderations as the automated vehiclemarket moves forward. As technologycontinues to improve, automated vehicleswill create new opportunities, and theinsurance industry and its experts havemuch to contribute. To the extent thatthis revolution may result in a world withfewer vehicle accidents and lower claimspayments, this can only be reliably deter-mined with a comprehensive and effec-tive plan for data collection and analysis.

A cooperative effort among actuaries,
insurers, risk managers, manufacturers,
technologists and policymakers is essential to bringing this technology safely to
market. Such an effort will allow all parties to participate in organizing and collecting data, sharing analytical insights,
and making policy recommendations.
Although there is much to be learned,
automated vehicles are getting the green
light, and we need to be prepared.

Jonathan Charak, FCAS, MAAA,
( jonathan.charak@zurichna.com) is an
assistant vice president and actuary
at Zurich. His role includes driving
efficiency and execution across multiple
initiatives, creating and communicating
financial plans, and improving business
reviews. He volunteers with the Casualty
Actuarial Society as the vice-chair of the
Automated Vehicle Task Force and on
additional committees.

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